John Rigas (founder and CEO of Adelphia Communications Corporation) was an extraordinary man. Throughout his professional career, he was honored for his entrepreneurial achievements and his humanitarian service. Among other awards, he received three honorable doctorate degrees from distinguished universities, was named Entrepreneur of the Year by Rensselaer Polytechnic Institute (his college alma mater) and was inducted into the Cable Television Hall of Fame by Broadcasting and Cable magazine. He worked hard to acquire wealth and status. But a $2.3 billion financial fraud eventually cost Rigas everything. Rigas and his company, Adelphia Communications, started out small. With $72,000 of borrowed money, he began his business career in 1950 by purchasing a movie theater in Coudersport, Pennsylvania. Two years later, he overdrew his bank account to buy the town cable franchise with $300 of his own money. Through risky debt-financing, Rigas continued to acquire assets until, in 1972, he and his brother created Adelphia Communications Corporation. The company grew quickly, eventually becoming the sixth largest cable company in the world with over 5.6 million subscribers. From its inception, Adelphia had always been a family business, owned and operated by the Rigas clan. During the 1990s, the company was run by John Rigas, his three sons, and his son-in-law. Altogether, members of the Rigas family occupied a majority five of the nine seats on Adelphia’s board of directors and held the following positions: John Rigas, CEO and chairman of the board (father); Tim Rigas, CFO and board member (son); Michael Rigas, executive vice president and board member (son); James Rigas, executive vice president and board member (son); Peter Venetis, board member (son-in-law). This family dominance in the company was maintained through stock voting manipulation. The company issued two types of stock: Class A stock, which held one vote each, and Class B stock, which held 10 votes each. When shares of stock were issued, however, the Rigas family kept all Class B shares to themselves, giving them a majority ruling when company voting occurred. With a majority presence on the board of directors and an effectual influence among voting shareholders, the Rigas family was able to control virtually every financial decision made by the company. However, exclusive power led to corruption and fraud. The family established a cash management system, an enormous account of commingled revenues from Adelphia, other Rigas entities, and loan proceeds. Although funds from this account were used throughout all the separate entities, none of their financial statements were ever consolidated. The family members began to dip into the cash management account, using these funds to finance their extravagant lifestyle and to hide their crimes. The company paid $4 million to buy personal shares of Adelphia stock for the family. It paid for Tim Rigas’s $700,000 membership at the Golf Club at Briar’s Creek in South Carolina. With company funds, the family bought three private jets, maintained several vacation homes (in Cancun, Beaver Creek, Hilton Head, and Manhattan), and began construction of a private world-class golf course. In addition, Adelphia financed, with $3 million, the production of Ellen Rigas’s (John Rigas’s daughter) movie Song Catcher. John Rigas was honored for his large charitable contributions. But these contributions also likely came from company proceeds. In the end, the family had racked up approximately $2.3 billion in fraudulent off-balance-sheet loans. The company manipulated its financial statements to conceal the amount of debt it was accumulating. False transactions and phony companies were created to inflate Adelphia’s earnings and to hide its debt. When the family fraud was eventually caught, it resulted in an SEC investigation, a Chapter 11 bankruptcy filing, and multiple indictments and heavy sentences. The perpetrators (namely, John Rigas and his sons) were charged with the following counts: Violation of the RICO Act Breach of fiduciary duties Waste of corporate assets Abuse of control Breach of contract Unjust enrichment Fraudulent conveyance Conversion of corporate assets Until he was convicted of serious fraud, everybody loved John Rigas. He was trusted and respected in the small town of Coudersport and famous for his charitable contributions and ability to make friends. He had become a role model for others to follow. With a movie theater and a $300 cable tower, he had built one of the biggest empires in the history of cable television. From small beginnings, he became a multimillion-dollar family man who stressed good American values. But his goodness only masked the real John Rigas, and in the end, it was his greed and deceit that ultimately cost him and his family everything.

Questions

4.) Based on the facts of the case, do you think this case has led to civil litigation, criminal prosecution, or both? Explain your answer. 5.) Suppose you were an expert witness in this case. What would be some of the facts to which you would pay special attention?

John Rigas (founder and CEO of Adelphia Communications Corporation) was an extraordinary
man. Throughout his professional career, he was honored for his entrepreneurial achievements
and his humanitarian service. Among other awards, he received three honorable doctorate
degrees from distinguished universities, was named Entrepreneur of the Year by Rensselaer
Polytechnic Institute (his college alma mater) and was inducted into the Cable Television Hall of
Fame by Broadcasting and Cable magazine. He worked hard to acquire wealth and status. But a
$2.3 billion financial fraud eventually cost Rigas everything.

Rigas and his company, Adelphia Communications, started out small. With $72,000 of borrowed
money, he began his business career in 1950 by purchasing a movie theater in Coudersport,
Pennsylvania. Two years later, he overdrew his bank account to buy the town cable franchise
with $300 of his own money. Through risky debt-financing, Rigas continued to acquire assets
until, in 1972, he and his brother created Adelphia Communications Corporation. The company
grew quickly, eventually becoming the sixth largest cable company in the world with over 5.6
million subscribers.

From its inception, Adelphia had always been a family business, owned and operated by the
Rigas clan. During the 1990s, the company was run by John Rigas, his three sons, and his son-in-
law. Altogether, members of the Rigas family occupied a majority five of the nine seats on
Adelphia’s board of directors and held the following positions:
John Rigas, CEO and chairman of the board (father); Tim Rigas, CFO and board member (son);
Michael Rigas, executive vice president and board member (son); James Rigas, executive vice
president and board member (son); Peter Venetis, board member (son-in-law).
This family dominance in the company was maintained through stock voting manipulation. The
company issued two types of stock: Class A stock, which held one vote each, and Class B stock,
which held 10 votes each. When shares of stock were issued, however, the Rigas family kept all
Class B shares to themselves, giving them a majority ruling when company voting occurred.
With a majority presence on the board of directors and an effectual influence among voting
shareholders, the Rigas family was able to control virtually every financial decision made by the
company. However, exclusive power led to corruption and fraud. The family established a cash
management system, an enormous account of commingled revenues from Adelphia, other Rigas
entities, and loan proceeds. Although funds from this account were used throughout all the
separate entities, none of their financial statements were ever consolidated.

The family members began to dip into the cash management account, using these funds to
finance their extravagant lifestyle and to hide their crimes. The company paid $4 million to buy
personal shares of Adelphia stock for the family. It paid for Tim Rigas’s $700,000 membership at
the Golf Club at Briar’s Creek in South Carolina. With company funds, the family bought three
private jets, maintained several vacation homes (in Cancun, Beaver Creek, Hilton Head, and
Manhattan), and began construction of a private world-class golf course. In addition, Adelphia
financed, with $3 million, the production of Ellen Rigas’s (John Rigas’s daughter) movie Song
Catcher. John Rigas was honored for his large charitable contributions. But these contributions
also likely came from company proceeds.

In the end, the family had racked up approximately $2.3 billion in fraudulent off-balance-sheet
loans. The company manipulated its financial statements to conceal the amount of debt it was
accumulating. False transactions and phony companies were created to inflate Adelphia’s
earnings and to hide its debt. When the family fraud was eventually caught, it resulted in an SEC
investigation, a Chapter 11 bankruptcy filing, and multiple indictments and heavy sentences. The
perpetrators (namely, John Rigas and his sons) were charged with the following counts:

Violation of the RICO Act

Breach of fiduciary duties

Waste of corporate assets

Abuse of control

Breach of contract

Unjust enrichment

Fraudulent conveyance

Conversion of corporate assets

Until he was convicted of serious fraud, everybody loved John Rigas. He was trusted and respected in the small town of Coudersport and famous for his charitable contributions and abilityto make friends. He had become a role model for others to follow. With a movie theater and a $300 cable tower, he had built one of the biggest empires in the history of cable television. From small beginnings, he became a multimillion-dollar family man who stressed good American values. But his goodness only masked the real John Rigas, and in the end, it was his greed and deceit that ultimately cost him and his family everything.

Garnett Jackson, the founder, and CEO of Tech Tune-Ups, stared out the window as he finished his customary peanut butter and jelly sandwich, contemplating the dilemma currently facing his firm. Tech Tune-Ups is a start-up firm, offering a wide range of computer services to its clients, including online technical assistance, remote maintenance, and backup of client computers through the Internet, and virus prevention and recovery. The firm has been successful in the 2 years since it was founded; its reputation for fair pricing and good service is spreading, and Mr. Jackson believes the firm is in a good position to expand its customer base rapidly. But he is not sure that the firm has the financing in place to support that rapid growth. Tech Tune-Ups’ main capital investments are its own powerful computers, and its major operating expense is salary for its consultants. To a reasonably good approximation, both of these factors grow in proportion to the number of clients the firm serves. Currently, the firm is a privately held corporation. Mr. Jackson and his partners, two classmates from his undergraduate days, have contributed $250,000 in equity capital, largely raised from their parents and other family members. The firm has a line of credit with a bank that allows it to borrow up to $400,000 at an interest rate of 8%. So far, the firm has used $200,000 of its credit line. If and when the firm reaches its borrowing limit, it will need to raise equity capital and will probably seek funding from a venture capital firm. The firm is growing rapidly, requiring continual investment in additional computers, and Mr. Jackson is concerned that it is approaching its borrowing limit faster than anticipated. Mr. Jackson thumbs through past financial statements and estimates that each of the firm’s computers, costing $10,000, can support revenues of $80,000 per year but that the salary and benefits paid to each consultant using one of the computers is $70,000. Sales revenue in 2014 was $1.2 million, and sales are expected to grow at a 20% annual rate in the next few years. The firm pays taxes at a rate of 35%. Its customers pay their bills with an average delay of 3 months, so accounts receivable at any time are usually around 25% of that year’s sales. Mr. Jackson and his co-owners receive minimal formal salary from the firm, instead taking 70% of profits as a “dividend,” which accounts for a substantial portion of their personal incomes. The remainder of the profits are reinvested in the firm. If reinvested profits are not sufficient to support new purchases of computers, the firm borrows the required additional funds using its line of credit with the bank. Mr. Jackson doesn’t think Tech Tune-Ups can raise venture funding until after 2016. He decides to develop a financial plan to determine whether the firm can sustain its growth plans using its line of credit and reinvested earnings until then. If not, he and his partners will have to consider scaling back their hoped-for rate of growth, negotiate with their bankers to increase the line of credit, or consider taking a smaller share of profits out of the firm until further financing can be arranged. Mr. Jackson wiped the last piece of jelly from the keyboard and settled down to work. Can you help Mr. Jackson develop a financial plan and Do you think his growth plan is feasible? financial statement (income statement & balance sheet)

Starware Software was founded last year to develop software for gaming applications. The founder initially invested

$ 800 comma 000$800,000

and received

88

million shares of stock. Starware now needs to raise a second round of​ capital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest

$ 1.60$1.60

million and wants to own

31 %31%

of the company after the investment is completed.

a. How many shares must the venture capitalist receive to end up with

31 %31%

of the​ company? What is the implied price per share of this funding​ round?

b. What will the value of the whole firm be after this investment​ (the post-money​ valuation)?

Aaron Levie is the co-founder of Box. Assume that his company currently has $250,000 in equity, and he is considering a $100,000 expansion to meet increased demand. The $100,000 expansion would yield $16,000 in additional annual income before interest expense. Assume that the business currently earns $40,000 annual income before interest expense of $10,000, yielding a return on equity of 12% ($30,000/$250,000). To fund the expansion, he is considering the issuance of a 10-year, $100,000 note with annual interest payments (the principal due at the end of 10 years).

Required

Using return on equity as the decision criterion, show computations to support or reject the expansion if interest on the $100,000 note is (a) 10%, (b) 15%, (c) 16%, (d) 17%, and (e) 20%.

What general rule do the results in part 1 illustrate?

Interns,

Mr. Howell, the prestigious founder and owner of our company would like you to perform an analysis on the company’s weekly revenues. He is requiring that the current weekly marginal revenue be at least $5,000 per week and if it is not currently at that level how fast should sales be changing to reach the target marginal revenue level. The most current information regarding weekly revenues can be found in Mr. Howell’s email below.

To be solved using derivatives.

“Mr. Kleppin,

It has come to my attention that our weekly marginal revenues may not be at the minimum level of $5,000 per week as I required. According to the sales report, we are currently selling 1,000 DVD’s per week and sales are currently rising by 200 DVD’s a week (gotta love the Marvel Universe! Customers can’t get enough!). They also inform me that our current selling price is $20 and that the price is dropping by $1 per week to encourage more sales. I would like you, Mr. Kleppin, to give the interns a chance to earn one of the 10 available positions at the end of their internship by giving them the opportunity to do the analysis. Again, I need to know if we are at the minimum level of $5,000 per week in marginal revenue, and if not, at what level should our sales per week be at so as to achieve the minimum marginal revenue level.”

Starware Software was founded last year to develop software for gaming applications. The founder initially invested $ 800,000 and received 8 million shares of stock. Starware now needs to raise a second round of​ capital, and it has identified a venture capitalist who is interested in investing. This venture capitalist will invest $ 1.00 million and wants to own 20 % of the company after the investment is completed.

a. How many shares must the venture capitalist receive to end up with 20 % of the​ company? What is the implied price per share of this funding​ round?

b. What will the value of the whole firm be after this investment​ (the post-money​ valuation)?

a. How many shares must the venture capitalist receive to end up with 20 % of the​ company? What is the implied price per share of this funding​ round?

The venture capitalist will receive _____ million shares. ​ (Round to three decimal​ places.)

The implied price per share is ​$____per share.  ​(Round to the nearest​ cent.)

b. What will the value of the whole firm be after this investment​ (the post-money​ valuation)? The value of the firm will be ​$____million. ​ (Round to three decimal​ places.)

Please read case and answer the question thank you.

Mark Zuckerberg, the founder of Facebook, once proclaimed in an interview that the “age of privacy” had to come to an end. According to Zuckerberg, social norms had changed and people were no longer worried about sharing their personal information with friends, friends of friends, or even the entire Web. This view is in accordance with Facebook’s broader goal, which is, according to Zuckerberg, to make the world a more open and connected place. Many Facebook features are premised on this position. Supporters of Zuckerberg’s viewpoint believe the 21st century is an age of “information exhibitionism,” a new era of openness and transparency.Facebook has a long history of invading the personal privacy of its users. In fact, the very foundation of Facebook’s business model is to sell the personal information of its users to advertisers. In essence, Facebook is like any broadcast or cable television service that uses entertainment to attract large audiences, and then once those audiences are in place, to sell air time to advertisers in 30- to 60-second blocks. Of course, television broadcasters do not have much if any personal information on their users, and in that sense are much less of a privacy threat. Facebook, currently with almost 1.8 billion users worldwide, clearly attracts a huge audience.Although Facebook started out at Harvard and other campuses with a simple privacy policy of not giving anyone except friends access to your profile, this quickly changed as its founder Mark Zuckerberg realized the revenue-generating potential of a social networking site open to the public.

1.Do people who use Facebook have a legitimate claim to privacy when they themselves are posting information about themselves?

2. How will changing your settings on Facebook help protect your privacy?

3. How can you prevent your Timeline from being indexed by Google or other search engines?

ABC Limited is a leading entertainment, artists and performance brokerage agency in Australia. ABC Ltd founder Mr. Right realised that China is a world-class media and entertainment platform and wants to begin penetrating the firm’s popular musical, magic shows there, but ABC Ltd has little international experience. Mr. Right is unaware of the various types of investment and nontariff trade barriers that ABC might face in China.

Q1. What types of investment barrier(s) might ABC Ltd face if they decide to enter into the China market? (around 100 words)